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South Korea’s Military Mutual Aid Association (MMAA) plans to invest 700 billion won ($606 million) in alternative assets in 2020. The association is also expected to allocate the largest proportion of its overseas alternative investments to private debt.

The $8.6 billion mutual aid fund that manages money from South Korean career military officers has earmarked about 700 billion won ($606 million) to invest in alternative assets home and abroad, industry sources said on January 10. This is similar to the amount in previous years. 770 billion won ($667 million) were allocated to alternative investments last year.

The association plans to allocate 350 billion won ($303 million) each to domestic and global alternatives assets. “Many [South Korean] institutional investors think that domestic opportunities to invest in alternative assets are limited and the MMAA also agrees to this idea” said an industry insider. “[The MMAA] is likely to gradually increase its allocation to overseas markets going forward.”

The association is especially looking for global opportunities to invest in private debt, which is expected to account for the largest proportion of overseas alternative investments made by the MMAA this year. Private debt is considered a steady asset class for investors seeking diversification and high risk-adjusted returns.

The association has continued to participate in private debt funds managed by global investment firms as a limited partner. “As far as I know, the MMAA focuses on private debt funds that lend money to companies with more than 100 billion won ($86 million) of EBITDA,” said another industry insider.

The association is said to have largely participated in private debt funds that invest in the U.S. companies due to greater accessibility of information and rapid growth of private debt in the region. The U.S. private debt market has grown at 15~20 percent per year in recent years.

In addition, the MMAA is expected to allocate a sizable portion of its assets to overseas real estate, largely by participating in a sell down process for equity investments in real estate properties by brokerage firms or asset managers. Such an investment is expected to yield stable dividend returns based on long-term lease agreements.

Last year the association participated in sell down processes for Tour Europe – a French skyscraper whose tenants include EDF, a French electric utility company largely owned by the French state – acquired by Korea Investment & Securities, as well as for Citypoint, an office building located in London, bought by Inmark Asset Management.

“The MMAA is an institution with a clear and quick decision-making process compared to other domestic institutional investors, which is good for counterparties,” said an industry insider.

(By reporter Kim Byung-yoon)